CUNA
  • Advocacy
    • Priorities we’re fighting for
    • Actions you can take
  • News
  • Learn
  • Compliance
  • Shop
  • Topics
    • Community Service
    • Compliance
    • Credit Union Hero
    • Credit Union Rock Star
    • Credit Union System
    • Directors
    • Human Resources
    • Leadership
    • Lending
    • Marketing
    • Operations
    • Policy & Issues
    • Sales & Service
    • Technology
  • Credit Union Magazine
    • Buyers' Guide
    • COVID-19
    • Digital Edition
    • Credit Union Hero
    • Credit Union Rock Star
    • Subscribe
    • Advertise
    • Contact
  • COVID-19
  • Advertise
  • Awards
    • Nominate Credit Union Hero
    • Nominate Credit Union Rock Star
  • Podcasts
  • Videos
  • Contact
Learn More about Member Value

News

Member Benefits
Learn more
Learn more about the benefits of membership.
Home » Subordinated debt proposal would help meet CU liquidity needs
Policy & Issues

Subordinated debt proposal would help meet CU liquidity needs

July 2, 2020

CUNA generally supports NCUA’s proposal on subordinated debt but offered several suggestions to improve the rule in its comment letter to the agency sent Thursday. The proposal would permit low-income designated credit unions, complex credit unions and new credit unions to issue subordinated debt for purposes of regulatory capital treatment, including for purposes of complying with the NCUA’s new risk-based capital requirement.

CUNA is a longtime supporter of access to alternative forms of capital, particularly since the 2008 Financial Crisis, which “demonstrated the need for and showed how credit unions would use alternative capital,” the letter reads.

“Our members have mentioned the importance of alternative capital as another source of capital for various liquidity needs, giving credit unions flexibility for their day to day operations as they grow and become more sophisticated,” the letter reads. “Regardless of how a credit union utilizes alternative capital, our members have consistently emphasized that a chief lesson from the Financial Crisis is that capital is king. While credit unions as a whole remain well capitalized, credit unions are the only financial institutions with no ability to raise capital other than through retained earnings. 

“However, the [subordinated debt proposal] would go a long way toward allowing credit unions to raise additional capital and thereby minimize any risk to the NCUSIF,” it adds.

CUNA focuses on NCUA’s authority to issue such a rule under the Federal Credit Union Act.

“The reason to move forward with a rule is as simple as the fact that the FCUA gives the NCUA Board authority to authorize this rule and credit unions have a need, as do all financial institutions, for alternative forms of capital,” the letter reads.

Among other things, allowable subordinated debt under the proposal would:

  • Have a maturity of at least five years and not more than 20 years from issuance; 
  • Be subordinate to all other claims in liquidation and have the same payout priority as all other outstanding subordinate debt and grandfathered secondary capital; 
  • Be unsecured; and 
  • Be available each fiscal year to cover any deficit in retained earnings on a pro rata basis among all holders of the subordinated debt and grandfathered secondary capital.

KEYWORDS ncua
Credit Union Magazine - Spring 2021

Spring 2021

Credit Union Magazine’s Spring 2021 edition features CUNA's 2021 advocacy agenda, strategic planning guidance, and labor market insights.
Digital Edition •  Subscribe

Trending

  • 4 tips for #CURockStars nominations

  • 48 credit union leaders graduate from Foundation’s virtual DE Program

  • Longer CU loan maturities could make education more affordable

Tweets by CUNA_News

Polls

How have vaccination efforts affected your remote work policy?

View Results
More

Champion of America’s Credit Unions

Credit Union National Association is the only national association that advocates on behalf of all of America’s credit unions. We work tirelessly to protect your best interests in Washington and all 50 states. We fuel your professional growth at every level and champion the credit union story at every turn.

More CUNA

  • About
  • Careers
  • Contact Us
  • Recommended Websites
  • Privacy Policy

Resources for

  • CUNA Board Members
  • Credit Union Advocates
  • Leagues
  • Press
  • Vendors